RCN warns of 13,000 NHS jobs cuts in cash crisis
Financial instability – the national picture: the NHS audit review shows well over a quarter of NHS organisations in England (including a third of Acute Trusts) have failed to break even at the end of the financial year 04/05. For the financial year 05/06, RCN does not believe that this is improving and estimates 27% of all NHS Trusts (and approximately half of Foundation Trusts) will report an end of year deficit.
Our own review of public reporting of financial deficits by NHS organisations to RCN representatives shows an overall deficit of around £840m in Acute Trusts, £48m in Foundation Trusts and £358m in PCT’s – a total of £1.2bn. Alongside the financial picture, we have received details of a reported loss approaching 4000 WTE posts from the NHS - this figure does not include jobs which may be lost as a result of the changes described in Commissioning a Patient led NHS.
Across the UK, each country has experienced differing levels of growth in funding and expenditure but all have experienced significant increases.
In terms of the experience of financial deficits, this is quite different from country to country as the rules governing expenditure are very different; the structures in which spending occurs are different; and each country will have different priorities in terms of overall allocation and spending plans.
Country 1999/00 2003/4 2005/6 2006/7
England £33.04bn £61.3bn £74.3bn £83.8bn
Northern Ireland £1.8bn £2.9bn £3.3bn £3.75bn
Scotland £5.16bn £7.10bn £8.62bn £9.33bn
Wales £2.98bn £4.1bn £4.87bn £5.14bn
In Wales some Trusts and Local Health Boards are reporting deficits although total spending on health care will increase to £5bn in 2006/07 – this compares with the £2.98bn health budget which the Assembly inherited in 1999.
Several NHS Boards in Scotland are forecasting deficits for the current financial year. Audit Scotland produced a report in December 2005 predicting a cumulative over spend of £91m with funding gaps in excess of £183m anticipated for 2006/7 . Boards are now required to produce savings plans to fill these gaps in funding and reduce expenditure.
In Northern Ireland the levels of deficit remain relatively small in comparison to England and tend to be short-term rather than structural, being managed through the manipulation of year-on-year budgets and through occasional financial assistance from the DHSSPS. There is an increasing shift in emphasis towards value for money in reviewing services which is impacting the distribution and organisation of services.
Whilst there are different experiences in each country, there is an overall trend which can be summarised as follows ;
· There are marked increases in funding allocations to each country from 1999-2006
· The rate of increase will probably level out over 2007/8 – 2008/9 but to different degrees as some countries have historically received insufficient allocations
· Each country health department will increasingly expect evidence of efficiency in spending and evidence of improved outcomes in return for increased investment. This is particularly true for England where a series of reforms have placed increasing emphasis on strict financial management and performance reporting.
Key Facts – sources of financial pressure
The following is a brief summary of some of the issues impacting upon NHS Trusts ability to break even. It is not true to say that the reason most Trusts are in deficit is down to poor management. Similarly, whilst it is true that the NHS has enjoyed record rises in funding, it has not all come directly to Trusts and front line services.
1. Many NHS organisations already have historical deficits to repay on top of those caused ‘in year’. For some, this can amount to millions of pounds. This can arise from previous poor management of resources but can also result, for example, from the changes in the way the PCTs pay money to acute trusts under Payment by Results (see glossary of terms), or the way in which funding formulae have changed over time
2. The current average cost of providing each service is a legacy of past decisions by NHS organisations – hence the term legacy costs (see glossary of terms). The actual costs of some services may be well above or well below the average cost per unit of activity for the NHS as a whole. Unless the services are completely redesigned or stopped altogether, this legacy of high costs will impact for the life of the service. In reality it is very difficult to do this . In England as PbR rolls out, these legacy costs will become more apparent and force Trusts to consider the viability of these higher than average cost services.
3. Across the UK, Health ministers have required substantial increases in activity from the NHS as a whole in order to address waiting lists and A&E waiting times. The additional activity when coupled with pressures on expenditure from other areas of reform has created cost pressures above and beyond the level of additional funding provided. According to the NHS Confederation, in England only 20% of the new money was spent on providing new services and only part has gone to addressing decades of chronic under funding.
4. In terms of any overspends related to staffing costs, the RCN has found that there is no significant correlation between financial deficits and the implementation of AfC. In fact some of the Trusts with the worst deficits have not even implemented AfC yet so we do not believe AfC is a key cause of deficits. There is evidence to suggest however that the substantially larger sums involved in delivering on Consultant contracts and GP contracts were not properly costed and this has had an impact on financial stability.
5. Alongside increases in activity there have also been net increases in staff numbers in certain areas to meet demand – estimated to have cost around £2bn. There has been an increase of approximately 89,000 more clinical staff employed in the NHS since 1999; 67,880 of which are nurses/midwives/health visitors .
6. Drug costs – these continue to rise and are up 5.6% on last year; by 46% since 2000
7. Total costs for IM&T have increased to £6.2 billion over 10 years . Overspends in meeting the technical challenge of linking up thousands of different organisations from SHA’s to Hospitals to GP surgeries are commonly reported. Implementing NPfIT is estimated to eventually run to £15bn.
8. Payment by Results – this averaging out of costs undertaken in drawing up the NHS tariff has left some Trusts with up to 20% less income than they would normally receive for the same or increased levels activity. There are also some Trusts who have benefited from the same process.
9. To date over £19bn has been invested in PFI schemes to provide new buildings in partnership with private companies. However there is ample documented evidence to suggest that on-going capital repayments under PFI are affecting service development and investment.
10. The effects of the global economic slowdown on the UK economy have produced a £20bn gap in public finances. This has forced the UK Treasury to borrow more resulting in criticism from the European Union and the International Monetary Fund (IMF) which has impacted upon Govt spending decisions.
RCN General Policy Position
The actual level of deficit when compared to the total NHS budget appears to be quite small but this is only half the picture. Locally, the impact of even a small percentage change in deficits can be disproportionate, particularly when considered alongside other costs pressures where organisations are already operating on very small margins.
The RCN has been carefully tracking the deficits picture across the UK through reports from activists and Regional staff; reviewing Trust, SHA, and Board governance papers; and monitoring national and local media. We have noticed a general trend in how NHS organisations are progressively responding to financial instability as follows
· In the first instance, many organisations have instigated blanket bans on the usage of temporary staff – this places immense pressure on existing clinical staff to increase activity without a corresponding increase in resources.
· This is often followed by vacancy freezes (with vacancies being eventually removed from establishment to provide financial break even picture). This coupled with freezes on temporary staff usage, and reductions in the funding of professional development and education, can damage staff morale and recruitment and retention.
· Latterly we have seen limitations on service provision (particularly specialist services such as health visiting). For example, changing opening hours and reducing the scope of the service.
· This can be followed by more permanent mergers of departments and directorates coupled with reductions in management and support services. In some cases, NHS organisations have decided to ‘disinvest’ or close a service completely.
· At the start of this year, we have received numerous reports of many NHS organisations are actively considering redundancies in response to their worsening financial situation.
· At the end of this financial year 2005/06, our activists and staff have reported back on a large number of NHS organisations predicted deficits for the end of year 2005/06 based on projected expenditure. Whilst a proportion of the deficit may be recovered, the extent of this recovery will depend on radical recovery plans which we believe will impact upon patient services and our members’ employment.
http://www.rcn.org.uk/news/campaigns/deficits/
Our own review of public reporting of financial deficits by NHS organisations to RCN representatives shows an overall deficit of around £840m in Acute Trusts, £48m in Foundation Trusts and £358m in PCT’s – a total of £1.2bn. Alongside the financial picture, we have received details of a reported loss approaching 4000 WTE posts from the NHS - this figure does not include jobs which may be lost as a result of the changes described in Commissioning a Patient led NHS.
Across the UK, each country has experienced differing levels of growth in funding and expenditure but all have experienced significant increases.
In terms of the experience of financial deficits, this is quite different from country to country as the rules governing expenditure are very different; the structures in which spending occurs are different; and each country will have different priorities in terms of overall allocation and spending plans.
Country 1999/00 2003/4 2005/6 2006/7
England £33.04bn £61.3bn £74.3bn £83.8bn
Northern Ireland £1.8bn £2.9bn £3.3bn £3.75bn
Scotland £5.16bn £7.10bn £8.62bn £9.33bn
Wales £2.98bn £4.1bn £4.87bn £5.14bn
In Wales some Trusts and Local Health Boards are reporting deficits although total spending on health care will increase to £5bn in 2006/07 – this compares with the £2.98bn health budget which the Assembly inherited in 1999.
Several NHS Boards in Scotland are forecasting deficits for the current financial year. Audit Scotland produced a report in December 2005 predicting a cumulative over spend of £91m with funding gaps in excess of £183m anticipated for 2006/7 . Boards are now required to produce savings plans to fill these gaps in funding and reduce expenditure.
In Northern Ireland the levels of deficit remain relatively small in comparison to England and tend to be short-term rather than structural, being managed through the manipulation of year-on-year budgets and through occasional financial assistance from the DHSSPS. There is an increasing shift in emphasis towards value for money in reviewing services which is impacting the distribution and organisation of services.
Whilst there are different experiences in each country, there is an overall trend which can be summarised as follows ;
· There are marked increases in funding allocations to each country from 1999-2006
· The rate of increase will probably level out over 2007/8 – 2008/9 but to different degrees as some countries have historically received insufficient allocations
· Each country health department will increasingly expect evidence of efficiency in spending and evidence of improved outcomes in return for increased investment. This is particularly true for England where a series of reforms have placed increasing emphasis on strict financial management and performance reporting.
Key Facts – sources of financial pressure
The following is a brief summary of some of the issues impacting upon NHS Trusts ability to break even. It is not true to say that the reason most Trusts are in deficit is down to poor management. Similarly, whilst it is true that the NHS has enjoyed record rises in funding, it has not all come directly to Trusts and front line services.
1. Many NHS organisations already have historical deficits to repay on top of those caused ‘in year’. For some, this can amount to millions of pounds. This can arise from previous poor management of resources but can also result, for example, from the changes in the way the PCTs pay money to acute trusts under Payment by Results (see glossary of terms), or the way in which funding formulae have changed over time
2. The current average cost of providing each service is a legacy of past decisions by NHS organisations – hence the term legacy costs (see glossary of terms). The actual costs of some services may be well above or well below the average cost per unit of activity for the NHS as a whole. Unless the services are completely redesigned or stopped altogether, this legacy of high costs will impact for the life of the service. In reality it is very difficult to do this . In England as PbR rolls out, these legacy costs will become more apparent and force Trusts to consider the viability of these higher than average cost services.
3. Across the UK, Health ministers have required substantial increases in activity from the NHS as a whole in order to address waiting lists and A&E waiting times. The additional activity when coupled with pressures on expenditure from other areas of reform has created cost pressures above and beyond the level of additional funding provided. According to the NHS Confederation, in England only 20% of the new money was spent on providing new services and only part has gone to addressing decades of chronic under funding.
4. In terms of any overspends related to staffing costs, the RCN has found that there is no significant correlation between financial deficits and the implementation of AfC. In fact some of the Trusts with the worst deficits have not even implemented AfC yet so we do not believe AfC is a key cause of deficits. There is evidence to suggest however that the substantially larger sums involved in delivering on Consultant contracts and GP contracts were not properly costed and this has had an impact on financial stability.
5. Alongside increases in activity there have also been net increases in staff numbers in certain areas to meet demand – estimated to have cost around £2bn. There has been an increase of approximately 89,000 more clinical staff employed in the NHS since 1999; 67,880 of which are nurses/midwives/health visitors .
6. Drug costs – these continue to rise and are up 5.6% on last year; by 46% since 2000
7. Total costs for IM&T have increased to £6.2 billion over 10 years . Overspends in meeting the technical challenge of linking up thousands of different organisations from SHA’s to Hospitals to GP surgeries are commonly reported. Implementing NPfIT is estimated to eventually run to £15bn.
8. Payment by Results – this averaging out of costs undertaken in drawing up the NHS tariff has left some Trusts with up to 20% less income than they would normally receive for the same or increased levels activity. There are also some Trusts who have benefited from the same process.
9. To date over £19bn has been invested in PFI schemes to provide new buildings in partnership with private companies. However there is ample documented evidence to suggest that on-going capital repayments under PFI are affecting service development and investment.
10. The effects of the global economic slowdown on the UK economy have produced a £20bn gap in public finances. This has forced the UK Treasury to borrow more resulting in criticism from the European Union and the International Monetary Fund (IMF) which has impacted upon Govt spending decisions.
RCN General Policy Position
The actual level of deficit when compared to the total NHS budget appears to be quite small but this is only half the picture. Locally, the impact of even a small percentage change in deficits can be disproportionate, particularly when considered alongside other costs pressures where organisations are already operating on very small margins.
The RCN has been carefully tracking the deficits picture across the UK through reports from activists and Regional staff; reviewing Trust, SHA, and Board governance papers; and monitoring national and local media. We have noticed a general trend in how NHS organisations are progressively responding to financial instability as follows
· In the first instance, many organisations have instigated blanket bans on the usage of temporary staff – this places immense pressure on existing clinical staff to increase activity without a corresponding increase in resources.
· This is often followed by vacancy freezes (with vacancies being eventually removed from establishment to provide financial break even picture). This coupled with freezes on temporary staff usage, and reductions in the funding of professional development and education, can damage staff morale and recruitment and retention.
· Latterly we have seen limitations on service provision (particularly specialist services such as health visiting). For example, changing opening hours and reducing the scope of the service.
· This can be followed by more permanent mergers of departments and directorates coupled with reductions in management and support services. In some cases, NHS organisations have decided to ‘disinvest’ or close a service completely.
· At the start of this year, we have received numerous reports of many NHS organisations are actively considering redundancies in response to their worsening financial situation.
· At the end of this financial year 2005/06, our activists and staff have reported back on a large number of NHS organisations predicted deficits for the end of year 2005/06 based on projected expenditure. Whilst a proportion of the deficit may be recovered, the extent of this recovery will depend on radical recovery plans which we believe will impact upon patient services and our members’ employment.
http://www.rcn.org.uk/news/campaigns/deficits/
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